So the Governing Documents require that a budget be prepared each year and the unit owners get a copy. Realize, however, that for the well-functioning property it doesn’t stop there.  You see, applying that information as a benchmark offers a very important monitoring opportunity, the chance to watch month by month as the year progresses.

Garbage in, garbage out.  The right way to do this is not, inflation is X so we just raise each cost by that percentage, satisfies the opening requirement, but offers us little else.  So, let’s do more.

Here’s your chance to get into the heart of each source of revenue, each aspect of expense.  Can’t do all this year?- then start with what’s the most discretionary, or what’s out of line with other properties.  We offer a per room checklist that can help you identify which costs may be out of line for your property.  While you need to maintain the systems and supply the amenities that you have, you can drill for cost savings gold by delving into the detail.   One aspect this year, another next.  Look back how at how it all comes together and the year after do it again, that is, if you really want to know and save.

There is detail to dig into. Someone has to lead and if they can divvy up the research, that’s preferred.  The higher intelligence of bringing it all together is necessary.  Have the Superintendent or Resident Manager dig into the maintenance systems and where the supplies are going.  Put the payroll on an hour-s-of-the week schedule to see who’s working when, you will find savings in overtime.  Speak to the insurance broker, have conversations on energy usage and potential savings ideas.  Benchmark your costs against data from other properties.   Some expenses are comparable from property to property, others are property-specific, but understanding the variances and the reasons will only strengthen your budget model.

Build a model that takes this down to the property aspect level, then it can all be summarized into where the money goes each year.  Avoid the use of miscellaneous or other, wherever possible.  Things break this year, but then not again for some period of time, so accumulation and expansion are tools available to make the best possible product.  When you are done, you and the Board will know so much more about where your money goes, then you can ask more than common sense questions as work needs to be accomplished.  You’ll find that relying on what you are told diminishes as your knowledge of this niche industry grows.  Accumulate the data for future Boards, your contribution will save money, increase revenue and build a Board with renowned function and culture.

Investment in the budget preparation will yield enhance monitoring, and possibly, even time saved in that function.  See our separate posting on using a well prepared budget as an incredibly effective internal control as a monitoring tool.